The Causal Effects of Economic Policy Uncertainty on Changes in Exchange Rates and Volatility: Empirical Evidence from Türkiye

Recep Çakar

Article Details

The Causal Effects of Economic Policy Uncertainty on Changes in Exchange Rates and Volatility: Empirical Evidence from Türkiye

Authors:

Recep Çakar

Publisher:

Afyon Kocatepe University

Main Topics:

Finansal Piyasalar ve Kurumlar

Journal:

Afyon Kocatepe Üniversitesi Sosyal Bilimler Dergisi Vol.26 Issue 1, pp.153-163

Document Type:

Article

Publication Date:

4/2024

Document Language:

English

Document ID (Org No.):

2001313572

pISSN:

1302-1265

Keywords:

Abstract:

 Applying a novel econometric method, nonparametric causality-in-quantiles approach, this paper investigates the causal effects of economic policy uncertainty EPU on Turkish changes in exchange rates and volatility with the monthly data spanning from February 1998 to December 2019. This approach of gives an opportunity to investigate the noncausality in the θ-th quantile only in mean first moment,i.e., m1 or variance second moment,i.e.,m2 as well as the noncausality in the mean and variance m1 and 2 successively. In sum, this approach calculates volatility by squaring returns. We use EPU indexes of the United States, Australia, European Union, Japan, Canada, and the United Kingdom and their currencies USD, AUD, EUR, JPY, CAD, GBP, respectively vis-à-vis Turkish Lira TRY and find that the EPUs of Australia, the European Union and Japan affect the returns of the AUDTRY, EURTRY and JPYTRY exchange rates, respectively. These results show that the EPU indices of these countries can give an idea about the returns and volatility of the relevant Turkish changes in exchange rates. The findings of this paper provide important implications for policymakers, investors, firms, exporters, and importers. Also, some studies can be carried out on the effects of the EPU index that will be created to Türkiye on the Turkish exchange rates or the other Turkish financial assets.

 Applying a novel econometric method, nonparametric causality-in-quantiles approach, this paper investigates the causal effects of economic policy uncertainty EPU on Turkish changes in exchange rates and volatility with the monthly data spanning from February 1998 to December 2019. This approach of gives an opportunity to investigate the noncausality in the θ-th quantile only in mean first moment,i.e., m1 or variance second moment,i.e.,m2 as well as the noncausality in the mean and variance m1 and 2 successively. In sum, this approach calculates volatility by squaring returns. We use EPU indexes of the United States, Australia, European Union, Japan, Canada, and the United Kingdom and their currencies USD, AUD, EUR, JPY, CAD, GBP, respectively vis-à-vis Turkish Lira TRY and find that the EPUs of Australia, the European Union and Japan affect the returns of the AUDTRY, EURTRY and JPYTRY exchange rates, respectively. These results show that the EPU indices of these countries can give an idea about the returns and volatility of the relevant Turkish changes in exchange rates. The findings of this paper provide important implications for policymakers, investors, firms, exporters, and importers. Also, some studies can be carried out on the effects of the EPU index that will be created to Türkiye on the Turkish exchange rates or the other Turkish financial assets.

 Applying a novel econometric method, nonparametric causality-in-quantiles approach, this paper investigates the causal effects of economic policy uncertainty EPU on Turkish changes in exchange rates and volatility with the monthly data spanning from February 1998 to December 2019. This approach of gives an opportunity to investigate the noncausality in the θ-th quantile only in mean first moment,i.e., m1 or variance second moment,i.e.,m2 as well as the noncausality in the mean and variance m1 and 2 successively. In sum, this approach calculates volatility by squaring returns. We use EPU indexes of the United States, Australia, European Union, Japan, Canada, and the United Kingdom and their currencies USD, AUD, EUR, JPY, CAD, GBP, respectively vis-à-vis Turkish Lira TRY and find that the EPUs of Australia, the European Union and Japan affect the returns of the AUDTRY, EURTRY and JPYTRY exchange rates, respectively. These results show that the EPU indices of these countries can give an idea about the returns and volatility of the relevant Turkish changes in exchange rates. The findings of this paper provide important implications for policymakers, investors, firms, exporters, and importers. Also, some studies can be carried out on the effects of the EPU index that will be created to Türkiye on the Turkish exchange rates or the other Turkish financial assets.

 Bu çalışma, ekonomik politika belirsizliğinin EPB Türkiye döviz kurlarının getirileri ve oynaklığı üzerindeki nedensel etkilerini Şubat 1998den Aralık 2019a kadar olan aylık verilerle yeni bir ekonometrik metod olan parametrik olmayan kantil nedensellik yaklaşımını uygulayarak araştırmaktadır. Bu yaklaşım, θ-inci nicelikteki olmayan nedenselliği yalnızca ortalama ilk moment, yani m1 veya varyans ikinci moment, yani m2 olarak araştırma fırsatı verir. Ayrıca ortalama ve varyansta m1 ve 2 art arda nedensellik olmayan bulunur. Özetle, bu yaklaşım, getirilerin karesini alarak oynaklığı hesaplar. Çalışmada Amerika, Avustralya, Avrupa Birliği, Japonya, Kanada ve Birleşik Krallıkın EPB endeksleri ve para birimlerinin sırasıyla USD, AUD, EUR, JPY, CAD, GBP Türk Lirası TRY karşısındaki değerleri kullanılmış ve Avustralya, Avrupa Birliği ve Japonyanın EPBsinin sırasıyla AUDTRY, EURTRY ve JPYTRY döviz kurlarının getirilerini etkilediği bulunmuştur. Bu sonuçlar, söz konusu ülkelerin EPB endekslerinin ilgili Türk döviz kurlarının getirileri ve oynaklıkları hakkında fikir verebileceğini göstermektedir. Bu çalışmanın bulguları, politika yapıcılar, yatırımcılar, firmalar, ihracatçılar ve ithalatçılar için önemli çıkarımlar sağlamaktadır. Ayrıca Türkiyeye oluşturulacak EPU endeksinin Türk döviz kurları veya diğer Türk finansal varlıkları üzerindeki etkileri konusunda da bazı çalışmalar yapılabilir.

Article Details

The Causal Effects of Economic Policy Uncertainty on Changes in Exchange Rates and Volatility: Empirical Evidence from Türkiye

Authors:

Recep Çakar

Publisher:

Afyon Kocatepe University

Main Topics:

Finansal Piyasalar ve Kurumlar

Journal:

Afyon Kocatepe Üniversitesi Sosyal Bilimler Dergisi Vol.26 Issue 1, pp.153-163

Document Type:

Article

Publication Date:

4/2024

Document Language:

English

Document ID (Org No.):

2001313572

pISSN:

1302-1265

Economic policy uncertainty

causality-in-quantiles test

exchange ratesEkonomi politika belirsizliği

kantil nedensellik testi

döviz kuru

Issues

Article Details

The Causal Effects of Economic Policy Uncertainty on Changes in Exchange Rates and Volatility: Empirical Evidence from Türkiye

Authors: Recep Çakar

Publisher: Afyon Kocatepe University

Main Topics: Finansal Piyasalar ve Kurumlar

Journal: Afyon Kocatepe Üniversitesi Sosyal Bilimler Dergisi Vol.26 Issue 1, pp.153-163

Document Type: Article

Publication Date: 4/2024

Document Language: English

Document ID (Org No.): 2001313572

pISSN: 1302-1265

Economic policy uncertainty

causality-in-quantiles test

exchange ratesEkonomi politika belirsizliği

kantil nedensellik testi

döviz kuru

Issues

Authors:

Recep Çakar

Publisher:

Afyon Kocatepe University

Main Topics:

Finansal Piyasalar ve Kurumlar

Journal:

Afyon Kocatepe Üniversitesi Sosyal Bilimler Dergisi Vol.26 Issue 1, pp.153-163

Document Type:

Article

Publication Date:

4/2024

Document Language:

English

Document ID (Org No.):

2001313572

pISSN:

1302-1265